Economics

Unequal Poverty: Tricks (Part Two of two)

Jacques Delacroix Comments, Current Events, Economics , , , , , , , , , , , , , ,

In the previous installment:

I explained how the general standard of living in America, denoted by real income, grew a great deal between 1975 and a recent date, specifically, 2007. This, in spite of a widespread rumor to the contrary. The first installment touched only a little on the following problem: It’s possible for overall growth to be accompanied by some immobility and even by some regress. Here is a made-up example:

Between the first and the second semester, grades in my class have, on the average, moved up from C to B. Yet, little Mary Steady’s grade did not change at all. It remained stuck at C. And Johnny Bad’s grade slipped from C to D.

Flummoxed by the sturdiness, the blinding obviousness of the evidence regarding general progress in the standard of living, liberal advocates like to take refuge in more or less mysterious statements about how general progress does not cover everybody. Or not everybody equally, which is a completely different statement. They are right either way and it’s trivial that they are right. Let’s look at this issue of unequally distributed economic progress in a skeptical but fair manner.

It’s awfully hard to prevent the poor, women and minorities from benefiting

I begin by repeating myself. As I noted in Part One, it’s too easy to take the issue of distribution of income growth too seriously. Some forms of improvements in living standard simply cannot practically be withheld from a any subgroup, couldn’t be if you tried. Here is another example: Since 1950, mortality from myocardial infarctus fell from 30-40% to 5-8%. (from a book review by A. Verghese in Wall Street Journal 10/26 and 10/27 2013). When you begin looking at these sort of things, unexpected facts immediately jump at you.

Fishing expeditions

The US population of 260 millions to over 300 million during the period of interest 1975-2007 can be divided in an infinity of segment, like this: Mr 1 plus Mr 2; Mr 2 plus Mrs 3; Mr 2 and Mrs 3 plus Mr 332; Mr 226 plus Mrs 1,000,0001; and so forth.

Similarly, the period of interest 1975 to 2007 can be divided in an infinity of subperiods, like this: Year 1 plus year 2; year 1 plus year 3; years 1, 2, 3 plus year 27; and so forth. You get the idea.

So, to the question: Is there a subset of the US population which did not share in the general progress in the American standard of living during some subperiod between 1975 and 2007?

The prudent response is “No.” It’s even difficult to imagine a version of reality where you would be right to affirm:

“There is no subset of the US population that was left behind by general economic progress at any time during the period 1975- 2007.”

Let me say the same thing in a different way: Given time and good access to info, what’s the chance that I will not find some Americans whose lot failed to improve during the period 1975 to 2007? The answer is zero or close to it.

This is one fishing expedition you can join and never come back empty-handed, if you have a little time.

Thus, liberal dyspeptics, people who hate improvement, are always on solid ground when they affirm, “Yes, but some people are not better off than they were in 1975 (or in _____ -Fill in the blank.)” The possibilities for cherry-picking are endless (literally).

Everyone therefore has to decide for himself what exception to the general fact of improvement is meaningful, which trivial. This simple task is made more difficult by the liberals’ tendency to play games with numbers and sometimes even to confuse themselves in this matter. I will develop both issues below.

To illustrate the idea that you have to decide for yourself, here is a fictitious but realistic example of a category of Americans who were absolutely poorer in 2007 that they were in 1975. You have to decide whether this is something worth worrying about. You might wonder why liberals never, but never lament my subjects’ fate.

Consider any number of stock exchange crises since 1975. There were people who, that year, possessed inherited wealth of $200 million each, generating a modest income of $600,000 annually. Among those people there were a number of stubborn, risk-seeking and plain bad investors who lost half of their wealth during the period of observation. By 2007, they were only receiving an annual income of $300,000. (Forget the fact that this income was in inflation shrunk dollars.) Any way you look at it, this is a category of the population that became poorer in spite of the general (average) rise in in American incomes. Right?

Or, I could refer to the thousands of women who were making a living in 1975 by typing. (My doctoral dissertation was handwritten, believe it or not. Finding money to pay to get it typed was the hardest part of the whole doctoral project.) One of the many improvements brought about by computers is that they induced ordinary people to learn to do their own typing. Nevertheless, there was one older lady who insisted all along on making her living typing and she even brought her daughter into the trade. Both ladies starved to death in 2005. OK, I made them up and no one starved to death but you get my point: The imaginary typists fell behind, did not share in the general (average) improvement and their story is trivial.

So, I repeat, given some time resources, I could always come up with a category of the US population whose economic progress was below average. I could even find some segment of the population that is poorer, in an absolute sense, than it was at the beginning of the period of observation. Note that those are two different finds. Within both categories, I could even locate segments that would make the liberal heart twitch. It would be a little tougher to find people who both were poorer than before the period observation and that would be deserving of liberal sympathy. It would be a little tough but I am confident it could be done.

So, the implication here is that when it comes to the unequal distribution or real economic growth you have to do two things:

A You have to slow down and make sure you understand what’s being said; it’s not always easy. Examples below.

B You have to decide whether the inequality being described is a moral problem for you or, otherwise a political issue. (I, for one, would not lose sleep over the increased poverty of the stock exchange players in my fictitious example above. As for the lady typists, I am sorry but I can’t be held responsible for people who live under a rock on purpose.)

Naively blatant misrepresentations

A hostile liberal commenter on this blog once said the following:

“Extreme poverty in the United States, meaning households living on less than $2 per day before government benefits, doubled from 1996 to 1.5 million households in 2011, including 2.8 million children.”

That was a rebuttal of my assertion that there had been general (average) income growth.

Two problems: first, I doubt there are any American “households” of more than one person that lives on less than $2 /day. If there were then, they must all be dead now, from starvation. I think someone stretched the truth a little by choosing a misleading word. Of maybe here is an explanation. The commenter’s alleged fact will provide it, I hope.

Second, and more importantly, as far as real income is concerned, government benefits (“welfare”) matter a great deal. Including food stamps, they can easily triple the pitiful amount of $2 a day mentioned. That would mean that a person (not a multiple person- household ) would live on $1080 a month. I doubt free medical care, available through Medicaid, is included in the $2/day. I wonder what else is included in “government benefits.”

The author of the statement above is trying to mislead us in a crude way. I would be eager to discuss the drawbacks of income received as benefits in- instead of income earned. As a conservative, I also prefer the second to the first. Yet, income is income whatever its source, including government benefits.

The $2/day mention is intended for our guts, not for our brains. Again, this is crude deception.

Pay attention to what the other guy asserts sincerely about economic growth.

Often, it implies pretty much the reverse of what he intends. In an October 2013 discussion on this blog about alleged increasing poverty in the US, I asked the following rhetorical question:

“Or have Americans’ standard of living only improved as the gap [between other countries and the US] closed?“

I meant to smite the other guy because the American standard of living has only increased, in general, as we have seen (in Part One of this essay posted). A habitual liberal commenter on my blog had flung this in my face:

“….Since 1975, practically all the gains in household income have gone to the top 20% of households…” (posted 10/23/13)

(He means in the US. And that’s from a source I am not sure the commenter identified but I believe it exists.)

Now, suppose the statement is totally true. (It’s not; it ignores several things described in Part One.) The statement says that something like roughly 60 million Americans are richer than they, or their high income equivalents were in 1975. It also says that other households may have had almost stationary incomes (“practically”). The statement does not say in any way that anyone has a lower income in 1975. At best, the statement taken literally, should cause me to restate my position as follows:

“American standards of living have remained stationary or they have improved….”

You may not like the description of income gains in my translation of the liberal real statement above. It’s your choice. But the statement fails to invalidate my overall assertion: Americans’ standard of living improved between 1975 and 2007.

What the liberal commenter did is typical. Liberals always do it. They change the subject from economic improvement to something else they don’t name. I, for one, think they should be outed and forced to speak clearly about what they want to talk about.

Big fallacies in plain sight

Pay attention to seemingly straightforward, common liberal, statist assertions. They often conceal big fallacies, sometimes several fallacies at once.

Here is such an assertion that is double-wrong.

“In the past fifteen years the 20% of the population who receive the lowest income have seen their share of national income decrease by ten percentage points.” (Posted as a comment on my blog on 10/21/13)

Again, two – not merely one – strongly misleading things about this assertion. (The liberal commenter who sent it will assure us that he had no intention to mislead; that it’s the readers’ fault because, if…. Freaking reader!)

A The lowest 20% of the population of today are not the same as those of fifteen years ago, nor should you assume that they are their children. They may be but there is a great deal of vertical mobility in this country, up and down. (Just look at me!) The statement does not logically imply that any single, one recognizable group of social category became poorer in the interval. The statement in no way says that there are people in America who are poor and that those same people became poorer either relatively or in an absolute sense. Here is a example to think about: The month that I was finishing my doctoral program, I was easily among the 20% poorest in America. Hell, I probably qualified for the 5% poorest! Two months later, I had decisively left both groups behind; I probably immediately qualified for the top half of income earners. Yet, my progress would not have falsified the above statement. It’s misleading if you don’t think about it slowly, the way I just did.

I once tried to make the left-liberal vice-president of a Jesuit university understand this simple logical matter and I failed. He had a doctorate from a good university in other than theology. Bad mental habits are sticky.

B Percentages are routinely abused

There is yet another mislead in the single sentence above. Bear with me and ignore the first fallacy described above. The statement is intended to imply that the poorer became poorer. In reality, it implies nothing of the sort. Suppose that there are only two people: JD and my neighbor. I earn $40, neighbor earns $60. In total, we earn $100. Thus my share of our joint income is 40%, neighbor’s is 60%. Then neighbor goes into business for himself and his income shoots up to $140. Meanwhile, I get a raise and my income is now $60.

In the new situation, my share of our joint income has gone down to 30% (60/60+140), from 40%. (Is this correct? Yes, or No; decide now.) Yet, I have enjoyed a fifty percent raise in income. That’s a raise most unions would kill for. I am not poorer, I am much richer than I was before. Yet the statement we started with stands; it’s true. And it’s misleading unless you pay attention to percentages. Many people don’t. I think that perhaps few people do.

My liberal critic was perhaps under the impression that his statement could convince readers that some Americans had become poorer in spite of a general (average rise) in real American income. I just showed you that his statement logically implies no such thing at all. If he want to demonstrate that Americans, some Americans, have become poorer, he has to try something else. The question unavoidably arises: Why didn’t he do it?

Was he using his inadequate statement to change the subject without letting you know? If you find yourself fixating on the fact that my neighbor has become even richer than I did because he more than doubled his income, the critic succeeded in changing the subject. It means you are not concerned with income growth anymore but with something else, a separate issue. That other issue is income distribution. Keep in mind when you think of this new issue that, in my illustration of percentages above, I did become considerably richer.

Liberals love the topic of unequal progress for the following reason:

They fail to show that, contrary to their best wish, Americans have become poorer. They fail almost completely to show that some people have become absolutely poorer. They are left with their last-best. It’s not very risky because, as I have already stated, it’s almost always true: Some people have become not as richer as some other people who became richer!

Policy implications of mis-direction about income growth

The topic matter because, in the hands of modern liberals any level of income inequality can be used to call for government interventions in the economy that decrease individual liberty.

Here are a very few practical, policy consequences:

A Income re-distribution nearly always involves government action that is, force. (That’s what government does: It forces one to do what one wouldn’t do out of own inclination.) That’s true for democratic constitutional governments as well as it is for pure tyrannies. In most countries, to enact a program to distribute the fruits of economic growth more equally it to organize intimidation and, in the end, violence against a part of the population. (For a few exceptions, see my old but still current journal article: “The Distributive State in the World System.“ Google it.) This is a mild description pertaining to a world familiar to Americans. In the 1920s, in Russia, many people (“kulaks”) were murdered because they had two cows instead of one.

Conservatives tend to take seriously even moderate-seeming violations of individual liberty, including slow-moving ones.

B Conservatives generally believe that redistribution of income undermines future economic growth. With this belief, you have to decide between more equality or more income for all, or nearly all (see above) tomorrow?

It’s possible to favor one thing at the cost of bearing the travails the other brings. It’s possible to favor the first over the second. This choice is actually at the heart of the liberal/conservative split. It deserves to be discussed in its own right; “Do your prefer more prosperity or more equality?” The topic should not be swept under the rug or be made to masquerade as something else.

If you are going to die for a hill, make sure it’s the right hill.

PS: There is no “income gap.”

Gentrifying Tacky Sac: not bad if you can stomach the corruption and iniquity

muricaderp Economics, Law, Liberty

A few months ago, I lit into the Capital Area Development Authority, or CADA, for redlining a significant portion of Midtown Sacramento to exclude poor and middling tenants. What I find particularly objectionable about this redlining is that it is done as a matter of deliberate government policy, since CADA is a joint powers authority chartered by the Sacramento municipal and California state governments, and that there seems not to have been any pushback from local activists or the courts.

CADA administers a huge amount of residential property to the east and south of the Capitol, enough to unilaterally set housing policy on a number of blocks. Some of the conditions that it sets for tenants are draconian, among them, open lines of credit with on-time payment histories, high credit scores, stable, long-term tenancies with landlords who are not friends are relatives, and absolutely no negative references from past landlords. These conditions are objectively discriminatory against poor applicants, who are often forced to rely on makeshift living arrangements with friends or relatives, unable to pay bills on time because they simply lack the money, and preyed upon and retaliated against by systematically criminal slumlords. The question is not whether discrimination against the poor is taking place here, but whether or not it is morally and legally acceptable.

There’s another question that really muddies the waters: is discrimination against the poor practical? Having spent quite a bit of time in Midtown and Downtown over the past few months, I have no doubt that CADA has done a lot to clean Midtown up. Midtown doesn’t have anything like the hordes of shambling homeless mentally ill, patina of grime, and trails of trash that one finds on the K Street light rail mall, or, as it’s lovingly called by its marketeers in the (posh) drinking industry, “The Kay.” The 16th Street light rail station has a bit of that dysfunction going on, but it’s safe to assume that CADA’s redevelopment activities, some of them only a block to the north, have brought some degree of improvement to the station by increasing the sheer number of non-derelict passengers using the station at off-peak hours. If this is the case, it has to have marginally improved the quality of life for the disproportionately poor passengers who change trains there. (16th Street is the last station leaving downtown before the Gold and Blue Lines split, the former east towards the dodgy neighborhoods of Rancho Cordova, the latter south towards the much scarier ghetto sector of inland South Sacramento.)

CADA’s territory in Midtown is more or less free of the malt liquor bottle shops, intractable pants-on-the-ground al fresco alcoholics, undermedicated long-term outpatients, and criminal underclass elements that plague many parts of Sacramento and its suburbs. These things have been driven out by clean and orderly businesses and the sort of clean and orderly people who patronize them, who are also the sort of people one is not scared to encounter on the streets late at night. I’ve come to the conclusion that, questions of equity aside, CADA is clearly doing something right.

This still leaves troubling questions of civics. I would have much weaker objections to a private developer applying such conditions to prospective tenants at a luxury apartment complex that was built entirely on the free market, i.e., completely without eminent domain, weaselly tax-break inducements, or other government favors. (These conditions are met disgustingly less often than developers would like us to believe). At a high enough level, any residual objections I might have to the abuse of credit rating inquiries or other background investigations would be moot anyway, since serious high-rollers in real estate consider cash on the barrel head the offering that covers a multitude of sins, a most fitting sacrifice of first fruits.

The problem is that draconian tenancy conditions are applied most heavily against those who can least manage to meet them. Many rental markets are monopolies or oligopolies controlled by slumlord thieves who steal tenants’ security deposits as a matter of course. In these markets, the idea of tenants of limited means being able to exercise a right of free association to find better landlords or some sort of roommate arrangement sounds like a cruel joke. On the whole, American housing law is de jure equitable but de facto a dual system of high and low justice.

The proper role of government intervention in such a market is to enforce equity standards on landlords, many of whom are easily shown to be in willful and material violation of federal racketeering law. As a matter of equity at law, government agencies have absolutely no business helping unethical and often criminal landlords and banks entrench themselves as private tyrants by allowing them to help redline the poor out of apartment complexes that are tantamount to public housing.

One of the great intellectual frauds of agencies like CADA is their false promotion as civic and community organizations. CADA is more accurately described as a regulatory capture apparatus operating at the behest of neighborhood business interests. A huge amount of what passes for community civics in the United States is in fact business marketing strategy enforced through government policy. This is classic regulatory capture. What business owners want in these cases is to flood the neighborhood with their target demographic. Sure enough, CADA’s rental conditions are perfectly designed to flood Midtown Sacramento with yuppies and their disposable incomes.

This is a point that cannot be made clearly enough: the purpose of CADA’s draconian rental conditions is NOT to ensure that its tenants are orderly, peaceable, acceptable risks to their landlord, and capable of improving community life through their presence; it is to ensure that they’re moneyed enough to patronize the local yuppie joints at a suitable price point. These conditions are patently not designed just to screen out risky applicants who have trashed previous rental units, worked crack territories on Hella South Stockton, held meth bake sales in Rancho Cordova, or had regular 3 am bruiser sessions with their live-in lovers and the Sheriff’s Department’s night watch. They are also designed to screen out perfectly peaceable and civic-minded applicants who brew their own Sanka at home and eat pork and beans out of a can instead of dropping thirty dollars a day on lattes and Thai food. Some of these people are exactly the types whose eyes are good to have on the street. Do we want maternal 7-Eleven clerks and home health aides from the trailer parks and the ghettos moving into the neighborhood to keep their eyes on the streets? As a matter of civics, we do. As a matter of economics, it probably depends on whether they’ll buy their pork and beans at the Midtown Safeway or trek out to the Rancho Cordova Grocery Outlet, but the answer is: No, they’re poors.

And no, this is not being done so that these mother hens will continue to grace their old neighborhoods with their wisdom and supervision. Any self-described progressive who says otherwise is concern-trolling the Sacramento banlieue with suggestions that the crabs all work to keep each other safely within the barrel. If anyone in charge of policy at CADA gives a shit about Rancho Cordova, I’m Mother Teresa.

It isn’t about high civics; it’s about marketing through government policy, a much crasser proposition. Many elements in the business community do their level best to elide the difference between civics and business, but it’s a real and serious one. CADA’s class-based redlining is effective policy, but it is not equitable or ethically sound policy. Don’t think for a split second that they’re the same thing.

On the great and glorious skeeviness of “Lean In” and Sheryl Sandberg

muricaderp Current Events, Economics, History, Links, Politics , , ,

It’s even worse than I had realized:

Joining “the community” was just a click away. In fact, the community was already uploaded and ready to receive them; all they had to do was hit the “Lean In Today” button on their computer screen . . . and, oh yeah, join Facebook. (There is no entry into Lean In’s Emerald e-Kingdom except through the Facebook portal; Sandberg has kept her message of liberation confined within her own corporate brand.)

Thomas enumerated the “three things” that Lean In offered. (In the Lean In Community, there are invariably three things required to achieve your aims.) First, Thomas instructed, “Come like us on Facebook” (and, for extra credit, post your own inspirational graphic on Lean In’s Facebook “photo gallery” and “tag your friends, tell them why you’re leaning in!”). Second, watch Lean In’s online “education” videos, twenty-minute lectures from “experts” (business school professors, management consultants, and a public speaking coach) with titles like “Power and Influence” and “Own the Room.” Third, create a “Lean In Circle” with eight to ten similarly aspirational young women. The circles, Lean In literature stresses, are to promote “peer mentorship” only—not to deliver aid and counsel from experienced female elders who might actually help them advance.

The author, Susan Faludi, later mentions that Sandberg’s career was propelled by very targeted and effective university-president-to-student mentorship from Larry Summers. Those of you who follow idiotic political “scandals” will recall that Summers was drummed out of the Harvard presidency a few years ago for being a rank misogynist, as proven by his impolitic comments about women not being naturals at advanced mathematics. The buried lede in the Summers sexism scandal was that he was by most accounts a rank abrasive in general. If I wanted to hang out with his kind, I’d track down the prep school headmaster who shoved me up against a wall in a crowded hallway and screamed at me from a foot away for uttering something along the lines of “that’s fucking crazy.” These guys bear more than a passing resemblance to each other. I don’t care to keep the company of either of them.

There’s an unseemly and disturbing cult aura surrounding Sandberg. The language that she uses in “Lean In” programming is too meaningless and slick, and her you-go-girl followers are a bit too fawning for sane society. As it turns out, like high court functionary, like boy-king:

On Mark Zuckerberg’s birthday, the women at the company were instructed to wear T-shirts displaying his photo, like groupies.

Kate Losse, the former Facebook employee who recounted this birthday stunt, ascribed it to rampant workplace sexism: “It was like Mad Men, but real and happening in the current moment, as if in repudiation of fifty years of social progress.” It was also, I’d add, a repudiation of other important lessons of the mid-Twentieth Century, such as those of Synanon and Rajneeshpuram. Synanon’s founder and tyrant, a marriage-wrecking compulsory vasectomy enthusiast by the name of Chuck Diederich, presided over a compound in West Marin County where he used a pirate radio station to berate his followers to “get your balls clipped,” terrorized neighboring landowners, and corrupted the sheriff’s department to the extent that the county grand jury received an extended audience with the California attorney general and the incumbent sheriff was voted out of office in favor of a previously obscure San Anselmo police captain (i.e., East Marin outsider, over the hill from Synanon’s cohort of reserve sheriff’s deputies) who promised to clean house.  The Rajneeshees spent the early 1980’s vigorously attempting to subvert local governments and poison the townies in Wasco County, Oregon. Sure, Zuckerberg isn’t that bad, or at least he’s a different kind of bad, but only a megalomaniac orchestrates that sort of self-aggrandizing birthday party stunt. His is the sort of behavior that should be nipped in the bud, because if it isn’t, it may reach a point meriting attention from the state police.

Given that Sandberg reports to a smirking, self-important boy wonder who never quite looks like he completed puberty, apparently has quite vulgar taste in office art, and enjoys being worshiped, one might not expect her to keep particularly upright company at her side gig. Indeed: 

Sandberg’s mantra has become the feminist rallying cry of the moment, praised by notable figures such as Gloria Steinem, Jane Fonda, Marlo Thomas, and Nation columnist Katha Pollitt. A Time magazine cover story hails Sandberg for “embarking on the most ambitious mission to reboot feminism and reframe discussions of gender since the launch of Ms. magazine in 1971.” Pretty good for somebody who, “as of two and a half years ago,” as Sandberg confessed on her book tour, “had never said the word woman aloud. Because that’s not how you get ahead in the world.”

The lovefest continues on LeanIn.org’s “Meet the Community” page, where tribute is paid by Sandberg’s high-powered network of celebrities, corporate executives, and media moguls (many media moguls), among them Oprah Winfrey, New York Times executive editor Jill Abramson, Newsweek and Daily Beast editor in chief Tina Brown, Huffington Post founder Arianna Huffington, Cosmopolitan editor in chief Joanna Coles, former Good Morning America coanchor Willow Bay, former first lady Laura Bush (and both of her daughters), former California first lady and TV host Maria Shriver, U.S. senators Barbara Boxer and Elizabeth Warren, Harvard president Drew Gilpin Faust, Dun & Bradstreet CEO Sara Mathew, Yahoo CEO Marissa Mayer, Coca-Cola marketing executive Wendy Clark, fashion designer Diane von Furstenberg, supermodel Tyra Banks, and actor (and Avon “Global Ambassador”) Reese Witherspoon.

Steinem’s feminism, as it happens, did not interfere with her shacking up with Mort Zuckerman, who has the most fascinating highbrow New York accent I’ve ever heard. Fonda is a second-generation movie star who polarized her country by going on a bizarre wartime mission to North Vietnam, quite arguably for nothing more than the publicity and the morality-whoring. Winfrey is a bottomfeeding charlatan who feigns histrionics for a living. Huffington is notorious for abusing unpaid staff writers at her for-profit publication, some of whom have begun suing for back wages. Boxer is a mediocrity at best who looks decent mainly because her most prominent colleagues in the California Congressional delegation, Feinstein and Pelosi, are morally hideous. Mayer is the girl you hated in high school for brownnosing all the teachers, being haughty because she maintained a 4.5 GPA, and talking shit about classmates for the lulz and the feeling of superiority.

What I find most worrisome is that Warren, one of the few sincere and credible populists in Congress, is also cradling this tar baby. The list is otherwise studded with exactly the sorts of oddities and sleazy operators one would expect, people who stand to lose much less esteem among the attentive for their involvement in this scam than does Warren.

And a scam is exactly what it is. By her own description, Sandberg scrupulously avoided saying anything about women until a few years ago. Then, as a high-powered corporate executive in her early forties, she suddenly started giving a shit about all this feminist empowerment stuff, as if after a career of being mixed up with Larry Summers and Mark Zuckerberg she was overcome with concern for other women and what she could do for them. One of my first suggestions would be to not offer them a chance to jump through hoops for an unpaid internship at a foundation run by a dot-com executive in support of her self-help racket. This isn’t about helping women, unless “women” is defined to mean Sheryl Sandberg and her cronies. It’s seedy marketeering sleaze. They would much more like to serve man. (Because, as Stalin put it, “of course it’s a fucking cookbook!”) 

Another way to look at it is as a sort of affinity fraud. Bernie Madoff didn’t swindle prominent New York Jews to make David Duke or Al Sharpton proud; he swindled them because he was one, and being one he knew their values, worldview, and cultural touchstones. Being a member of the same local ethnic and religious community also helped him build his victims’ trust, much like the guy who faked his own death in a staged plane crash in Alabama had done when he moved from Indianapolis to Atlanta to yuk it up about aviation with guys flying the big metal at the Delta crew base, then take their money in a pyramid scheme for pilots and run. If it doesn’t take one to know one, it takes one to dupe one. Sheryl Sandberg and her cronies are successful women, so they’re perfect marketeers for campaigns targeting less successful but aspiring women. By contrast, I wouldn’t succeed as a marketeer to teh wymmynz because I have the male perspective, and I’d have a hard time sealing deals with Madoff’s old crowd as a three-quarters goy son of a Staten Islander. 

These affinity frauds are all about exploiting and destroying the social capital built up by other people in high-trust communities. Why women as an overarching nebulous collective would be anything but a rock-bottom-low-trust community is inexplicable under any sort of logic, but it’s widely held to be the case. Meanwhile, it’s regarded as marginal and crazed (correctly so, I’d say) to make equivalent comments declaring a universal male solidarity bonding all men everywhere. This double standard has been established by little more than the sheer repetition of crude tautologies about differences between the sexes. Bizarrely, the activists advancing these tautologies simultaneously pride themselves on being sexual equalists. Whether they believe their own bullshit (about sexual equality, female superiority, or both) is debatable, but the language and imagery that they use certainly tend not to be conducive to introspection and sanity.

What they’re running on the public is a massive, often coordinated advertising campaign: in other words, a psychological operation, which is exactly what most modern advertising is. Whether it’s better for these psychological operators to be craven and sentient or to go fully native and truly believe the stuff is a matter of personal preference, dictated by whether one prefers to be manipulated by the consciously evil or by those who are simply out of their goddamn minds.

The end result of this process, however it operates, is that many women who would unabashedly describe specific female relatives or acquaintances as crazy bitches are convinced to place their complete trust in the judgment and morals of women utterly strange to them, specifically because they’re women and they’ve been declared leaders. Sure, my sister steals my sterling and china to feed her meth habit whenever she visits, then we catch her and she guilt-trips us about feeding her children and promises to get clean, but I totally trust this Sandberg lady because she says such nice things about empowering women. The key, of course, is that these thoughts are had subconsciously and separately; otherwise they’d be too ridiculous to grok. 

As Faludi shows, much of the “Lean In” programming is devoted to eliding class divisions by focusing on a meretricious sense of cross-class female solidarity. Here she understates her case, just as she does in only tangentially mentioning Arianna Huffington as a “Lean In” supporter without discussing her being a moneyed woman mooching off of unpaid labor to run her for-profit publication. Sheryl Sandberg is a very wealthy and well-connected corporate executive working in an era of extreme income inequality, diminished social mobility, and a ruined job market. She advanced substantially on the basis of her collegiate relationship with a future Treasury Secretary. Sandberg’s biography, as opposed to the self-help pap she’s marketing, is one of class solidarity with other members of the overclass, not one of gender solidarity with other women. Her example is relevant to men at Harvard, Yale, Princeton, and to a lesser extent at somewhat less well-connected universities; it is irrelevant to women at College of the Redwoods or SUNY-New Paltz, let alone women with GED’s working as home health aides in Southie. If you’re wondering why Harvard women don’t hang out in Lowell, Faludi has an explanation: 

In 1834, America’s first industrial wage earners, the “mill girls” of Lowell, Massachusetts, embarked on their own campaign for women’s advancement in the workplace. They didn’t “lean in,” though. When their male overseers in the nation’s first large-scale planned industrial city cut their already paltry wages by 15 to 20 percent, the textile workers declared a “turn-out,” one of the nation’s earliest industrial strikes. That first effort failed, but its participants did not concede defeat. The Lowell women would stage another turn-out two years later, create the first union of working women in American history, lead a fight for the ten-hour work day, and conceive of an increasingly radical vision that took aim both at corporate power and the patriarchal oppression of women. Their bruising early encounter with American industry fueled a nascent feminist outlook that would ultimately find full expression in the first wave of the American women’s movement. 

…

The Lowell factory owners had recruited “respectable” Yankee farmers’ daughters from the New England countryside, figuring that respectable would translate into docile. They figured wrong. The forces of industrialization had propelled young women out of the home, breaking the fetters binding them to the patriarchal family, unleashing the women into urban areas with few social controls, and permitting them to begin thinking of themselves as public citizens. The combination of newly gained independence and increasingly penurious, exploitative conditions proved combustible—and the factory owners’ reduction in pay turned out to be the match that lit the tinder. Soon after they heard the news, the “mill girls”—proclaiming that they “remain in possession of our unquestionable rights”—shut down their looms and walked out.

 Farmers’ daughters working in factories: they must have been poors, no? Indeed: 

The Lowell turn-out was a communal endeavor, built on intense bonds of sisterhood forged around the clock: by day on the factory floor, where the women worked in pairs, with the more experienced female worker training and looking out for the newcomer, and by night in the company boarding houses, where they shared cramped quarters, often two to a bed, and embroiled themselves in late-night discussions about philosophy, music, literature, and, increasingly, social and economic injustice. As Dublin observed of the web of “mutual dependence” that prevailed in the Lowell mill workforce, the strike was “made possible because women had come to form a ‘community’ of operatives in the mill, rather than simply a group of individual workers.” An actual community, that is—not an online like-a-thon. Tellingly, the strike began when a mill agent, hoping to nip agitation in the bud, fired one of the more voluble factory workers whom he regarded as the ringleader. The other women immediately walked out in protest over her expulsion. The petition they signed and circulated concluded: “Resolved, That none of us will go back, unless they receive us all as one.” 

Yup. Icky poors working shit jobs and doing the community organizing thing because they had no alternative. These are the kind of people who obediently go home to the ass ends of Boston after finishing their shifts at Harvard Yard. One does not associate freely and equally with such people as a Harvard woman. And all this community stuff is le hard. It takes too much time away from Candy Crush Saga. 

The result is a nation whose women can’t make it to the Grange meeting either because they’re too busy being socially-climbing careerists or because the meeting conflicts with Oprah. I know, I’m indulging in sentimental agrarian populist fantasy, and that most of my friends would have to ask me what the hell is a grange, but the same thing goes for men who are too busy watching SportsCenter and UFC pay-per-view to get to union meetings or bowling clubs.

The issue here isn’t sex, but class. Get rid of all chauvinism in these downmarket organizations, and the overclass will still be discomfited. Sheryl Sandberg and company don’t want any of us hanging out at the union hall. They want us to mind our own business, not the community’s. They certainly don’t want anyone getting the idea that they’re winning at a rigged game. 

Growing Poverty, a Declining Standard of Living: Watch Out for…. Part 1.

Jacques Delacroix Economics, History , , , , , , , , , , ,

It’s vital to the liberal narrative that pretty much everything has to go generally downhill (except global warming, of course, which is always going up even when it’s not, like right now). Life has to deteriorate, they think. That things are getting worse is an article of faith among liberals; it’s even a tenet of their faith. (If things are swimming along fine, what excuse is there for government intrusion?) You might even say that most liberals hate most good news. Prominent among the liberals’ permanent myths is the belief that Americans have become poorer except for a tiny minority of the very rich __________% (Fill in the blank.) In its most common version the idea is that Americans’ real standard of living has done nothing but decline since sometimes in the seventies. This, whatever the numbers say.

I, for one, know it’s not true. I was there, after all, from the beginning, even from before the beginning! I remember well how bad the good old days were in many respects. I am distressed that some people with apparently conservative or libertarian ideas have now also espoused this false belief. In this essay in two parts, I try to help readers find their way in the midst of often misleading or downright false statements that seem to support this erroneous belief. As usual, I do not address myself to specialists but rather to the intelligent but ignorant. Specialists are welcome to comment if they agree to do it in English or in some other official language.

Two forewords

1 I don’t contend that I understand what happened to American real incomes during the current crisis, say, between 2009 and 2013. I will say nothing about this recent period. (If I told you what I suspect happened, you might be astounded, though.) I refer in this essay only to the period 1975-2007.

2 I believe poverty and prosperity have to be measured in terms of real income, income as experienced by real human beings: It’s not how many dollar bills you have in your wallet, it’s what your paycheck actually buys that matters. This brings up several tough technical problems we will get into presently or in the next episode. If you think of poverty in different terms, I am not sure I have anything useful to say to you.

The superficial facts

General federal statistics, all OECD figures, all World Bank numbers show that on the average Americans have become considerably richer since 1975. Nevertheless, these statistics, contrary to a now common belief – significantly understate the economic progress of Americans. We, in general, have become vastly richer than were were then.

I will deal later explicitly with the issue of possible differences between what the average shows and the economic progress of sub-categories of the US population. In the meantime, I must point out that some common forms of enrichment cannot be confined to a particular group. Cleaner drinking water, for example, is usually cleaner for everyone. It would be impractical to reserve wells of dirty, polluted water for the poor or for racial minorities. (However, if you search a little you might actually find liberal allegations of such segregation or, at least, the intimations of such. National Public Radio is a good bet.)

Here is what I don’t intended to do, don’t do: I do not accuse government statistics of lying. I help others read them and complement them where they need to be complemented. There is not government conspiracy designed to mislead us about the living standards of Americans, I think.

Major (unintended) sources of bias.

There are three major sources of bias in expressing standard of living that understate, underestimate, understate economic betterment. I explain them below.

Ballooning health expenditures

Since the seventies, most employed Americans have taken most of their pay raises in the form of health benefits. This results from a historically accidental peculiarity of the American wage and benefit system going back to WWII. (It may be getting removed by the implementation of Obamacare as I write in 2013). The large increase in health expenditures provided by employers do not appear in wage statistics. Yet, they constitute consumption in a way similar to straight wages. In fact, wherever people are given a choice between more steak and more health care, they seem to chose more steak and more health care. Health care possesses an interesting characteristic all of its own: While there is a limit to how much steak an individual can ingest, there is no limit at all to how much health care -broadly defined – the same individual can absorb. It’s close to infinite. Why, I am considering right now some surgery to correct a nose I have not really liked for more than sixty years!

Whether it is a wise societal choice to spend apparently limitless resources on health care, much of it for the old and economically unproductive is an interesting issue in its own right. However, it’s not my issue here. Health services have been produced in vast quantities since 1975. They were eagerly consumed by Americans. Health expenditures constitute a part of the standard of living. If you don’t believe this, just ask yourself if the withdrawal of all health care would not be a lowering of the standard of living.

Better quality of common goods

Common objects on which comparisons of living standard across time are based have improved tremendously in quality. This is difficult, sometimes impossible to measure. Indices of comparison across time (1975 to 2007) don’t do a good job of it.

Nominal wages, the numbers printed on your paychecks, have to be corrected for inflation. We all know that a dollar does not buy as much as it did in 1975. (Around that time, my salary of $20,000/year was quite comfortable.) Federal international and private organizations in charge of these things do their very best to correct raw numbers in meaningful ways. However, they meet with several limitations because things of 1975 are often radically different from what bears the same name in 2007.

(Note: The agencies in charge do their best and mostly intelligently. Again, I am not faulting their efforts. Also, I think there is little intellectual fraud involved in this work because their results are among the most and best scrutinized in the history of the world.)

Here is an example: I suspect that the average television set of 1975 was like mine was then: It was small, offered only black and white images, often had scratchy sound, and gave access to little more than three national networks. Watching television then was like eating in a mediocre restaurant that offered only three dishes ( and there was maybe a hot dog stand outside).

When economists correct for inflation, they have little choice but to compare that television set with a modern ultra-flat etc… Hence, when they report that the cost of a television set has increased in face dollars by, say, 100%, they are not able to take into account that the actual service (the enjoyment) attached to a contemporary set with precise colors, faithful sound that is a gateway to 300 sources is ten times, or one hundred times, greater than what I derived from my 1975 B&W set.

This example can pretty much be turned into a general rule: Everything is better, works better, tastes better, gives more service than its equivalent back then. When you find a seeming exception, you soon discover that it’s not real. Two examples of exceptions that don’t resist examination:

A     Cars are more expensive now than then by several measures. This means that it takes more days of mean (average) American wages to buy the cheapest car in American than it did then. But the cheapest car on American roads today are vastly better in every way than their supposed equivalent back then. They break down less often; they are safer (weight for weight); they require much less maintenance. (Older people will remember the days when every car required an oil change every 5,000 miles and when prudent car owners changed oil every 3,500 miles.)

In addition, much of the rise in real car prices is due to mandated safety and environmental buffers now built into them that did note exist in 1975. (It’s startling to see in not-so-old movies parents getting into the family car with their children and driving off with no one buckling safety belts because there aren’t any.) No matter how one feels about the current health and environmental restrictions pushing upward car prices, they are undeniably form of consumption. It’s useless to cry,” I don’t want it” when you imposed it on yourself through the political process you deem legitimate in every way.

B     Many older people, and I am often tempted to join them, believe that any number of produce just tasted better back then, produce such as tomatoes and strawberries, for example. This is pure delusion. Here is how I know: Several times, I have steeled my resolve, put cash in my pocket and directed my steps to the local farmers’ market. There, against all my instincts, I purchase a pound of organic tomatoes or a tiny basket of grossly priced strawberries. Now organic produce is not better for you (See “organic food” on this blog.) but it’s often fresher, and often handpicked. Each time, I recovered in my mouth the taste of produce of my youth. Each time, I did the calculations only to rediscover anew that the outrageous cost of the farmer’s market produce was actually less, as a percentage of any income, or in inflation-corrected dollars, than the equivalents did when I was young.

We have become used to paying little for mediocre produce, the better produce of yesteryear are still available. They are not even especially expensive. They appear expensive because we are spoiled by general low food prices.

An then, of course, there is the coffee. It was so vile then, coast-to-coast, in 1975 that if anyone but a drunks’ bar served it today he would probably be indicted. And then, there is bread that would have qualified as light construction material. The list is endless: In the good old days, most things were mediocre to very bad and they were, in fact expensive. Current measures are seldom able to take improvement in quality into account. For this reason, they understate average economic progress in America between 1975 and 2007.

I repeat that this average economic progress is also mostly widespread, available to all parts of the population. There are, in fact, few corner bakeries operating especially in the ghetto and specializing in nutritionally unsound, bad-tasting bread for African-Americans.

There may be an exception to the general rule that things have become cheaper in thirty years with constant quality I am not able to deal with here. It may be a major exception: Housing in all its forms may be more expensive in real terms now than it was in 1975. Much housing is the same now as it was then, so prices matters a great deal. Thus, better quality would not explain superior cost. I am eager to see sources on this issue and to publish them here.

New goods, new services

When comparing the prices of things and services then and now, economists are not able, of course, to take into account objects and services that simply did not exist then. This inescapable fact also understates the real progress in living standards. I repeat: Some good things are not counted at all in comparisons of the standard of living then and now because they did not exist at all then. This fact in itself constitutes an overstatement of the standard of living of then. The Internet and its many manifestations, its many subordinate services, such as Google, are a case in point.

I hasten to add that this judgment does not depend on how much you, personally value the Internet and its multiple offerings. To demonstrate that it’s a form of consumption, it’s enough to observe that few of those who can have access to the Internet actually turn it down. I, for example, like most residents of developed societies probably know more than one thousand people. Of the people I know, only three refuse to gain Internet access (and they periodically cheat by catching a ride on a relative’s network tool!)

I can hear some older readers grumble ( as one did recently on this blog) that newfangled technical innovations, such as the Internet and hugely better television, actually made life worse. I smile sarcastically inside for the following reason: Very few Americans seem to be following the primitivist dream implicit in such judgment and make for the wilderness. This, although it would be easy because there is probably more and more undeveloped, empty space in America as the population become more concentrated in a few mega cities. This is too has improved since 1975: There is more and wilder wilderness.

Summary

Large health expenditures, better products, more products have increased the general standard of living of Americans considerably beyond what wage and income statistics show. This statement is implicitly based on averages. The demonstration above does not exclude the logical possibility that some sectors of American society were worse off in 2007 than they, or their equivalents were in 1975. This issue is dear to liberal sensitivity. I deal with it in Part 2, soon forthcoming.

“Could we build a bridge between Austrian Economics and New Institutional Economics? – A Pre-History of Soft Budget Constraint”

Brandon Christensen Economics , , , ,

This is the title of a paper by Claudio Shikida. Here’s the abstract:

The concept of soft budget constraint is recent in economic analysis. It has become increasingly important in economic theory, for its role as a system of incentives. However, soft budget constraint plays also an important role in the history of economic thought, where it can be traced back until Mises’s writings on economic calculation and property rights, both derived from the debate of the economic calculation in socialist regimes. In this sense, soft budget constraint can be viewed as a bridge between Austrian Economics and New Institutional Economics. Since Mises, like other Austrian economists, is virtually ignored in Brazilian courses of Economic Thought, this article intends to show his importance as a forerunner of the concept of soft budget constraint, and will try to link these two theoretical views of economic systems.

You can read the whole thing here. Any thoughts?

What Ails You, Economy?

henrymoore Economics , , , , , , , , , , ,

The Keynesian is ever mistaking economic activity for economic growth, credit expansion for wealth creation, profligacy for progress. Growth, wealth, progress. He uses his own definitions of each to reinforce his definitions of the others. And they are all fallacious.

When the Austrian tells the Keynesian that the printing and spending of mere pieces of paper cannot lead to more wealth in society, the Keynesian retorts that it is undeniable that credit expansion and stimulus lead to more economic activity. In this he is technically correct. Printing more dollars and handing them out to those who would consume and invest them, does indeed lead to “activity,” even more perhaps than there otherwise would have been.

But our Keynesian assumes, or assumes that his audience will assume, that mere economic activity is growth, is wealth, is progress. Presumably this includes even that activity which our Austrian rightly considers overinvestment (more properly, malinvestment), overconsumption, and/or the proverbial breaking of windows, each of these a common side-effect of the Keynesian witchdoctor’s remedies (often intended to cure ailments caused by earlier interventions, some Keynesian, some not).

If the Keynesian’s definition of economic activity doesn’t (oh, but it does!) include these things then the burden of proof is on him to show that his prescriptions lead to more real growth than would their absence on an unhampered market. And that his incantations lead, on the whole, to economic health rather than disease. A free market is largely unencumbered by the ailments mentioned above so in order to do this it would need to be shown that the sicknesses that do affect it are somehow worse than those caused by intervention.

And to be sure, pure economic freedom isn’t perfect. It has its own share of maladies. But these are all coughs and sneezes by comparison. Cures, if they are needed at all, come from the market itself. The economic meddlers and potion peddlers only serve to make things worse.

We must admit that not even on the most unfettered of markets does all economic activity lead to growth. For human actors err, and the market punishes their errors. How much more is all this the case under a centrally-planned expansionary-monetary/stimulatory-fiscal regime? And how much more severe will be the punishment?

Criminalizing Innovation

Fred Foldvary Economics, Liberty , ,

By Fred Foldvary

The U.S. government has attacked an entrepreneur and his new product, as another episode of the federal government’s war on enterprise. In this case, the entrepreneur CEO is Craig Zucker, the company was Maxfield & Oberton, and the product was Buckyballs.

Buckyballs were small magnetic spheres made of neodymium, a rare-earth element that is a powerful magnet. As they stick together, the balls can be assembled into shapes such as pyramids. They were named “Buckyballs” after Buckminster Fuller, an American architect, inventor of the geodesic dome, and futurist visionary. His friends called him “Bucky,” and the neodymium spheres were somewhat like Bucky’s domes.

The company imported the balls from China and started selling them in 2009. They became a popular office toy. But the Buckyballs were banned in July 2012 by the federal Consumer Product Safety Commission, which is now seeking to prosecute Zucker for having sold the balls.

In 2012 the Commission also sent letter to retailers warning of the risks to consumers of using Buckyballs and asking them to stop selling them. That was effective in stopping the sales. The Commission stated that the balls were a hazard for young children who swallowed them.

The company had developed the Buckyballs in collaboration with the Consumer Product Safety Commission, and after the action by the Commission, the firm provided it with a corrective-action plan. Buckyballs were sold with a warning against access by children, and they were not sold in toy stores. But the Commission pursued a lawsuit against the firm even before examining the corrective plan. As pointed out by the Wall Street Journal article (cited below) on that case, there are many potentially dangerous products being sold, such as cleaning chemicals, knives, and balloons. Buckyballs were intended and marketed for adults, and, according to the WSJ article, no deaths have been associated with the Buckyballs.

The Commission declared, as a justification for the ban, that Buckyballs have “low utility” and are unnecessary, despite purchases by 2.5 million adults who spent $30 each. The principle established by the Commission is that government determines which products are desirable, not consumers. Any product could be banned by the standards of the Commission.

The company then engaged in a publicity campaign regarding the actions by the Commission. In the end, the government was too powerful to resist, and the company was terminated in December 2012. However, in February 2013, the Commission charged Zucker as being personally liable for the costs of a recall costing $57 million if the Buckyballs are judged to be defective.

The federal government has by this action abolished limited personal liability under U.S. law for corporations as well as partnerships. From now on, the executives of a firm will be vulnerable for the liabilities of the firms. Any entrepreneur will now risk losing all that he owns if he engages in the production or distribution of any product. The effect of this government action is to strangle American entrepreneurship.

In the case of United States v. Park in 1975, the Supreme Court ruled that the CEO of a food company was criminally liable for a rodent infestation. This ruling was based on the federal Food and Drug Act. But another case, Meyer v. Holley in 2003 ruled that ordinary liability applies unless there is a clear Congressional intent to hold corporate officers personally liable. The relevant law in the Buckyballs case is Section 15 of the Consumer Product Safety Act, which regulates corporate persons, not individual persons.

The WSJ article says that since Zucker did not commit any criminal violation, the Commission’s continuing prosecution of Zucker “raises the question of retaliation for his public campaign against the commission.” If the Commission achieves its goal, personal-injury lawyers will take advantage of personal liability to go after CEOs and other company personae.

This action by Congress, the Courts, and the Commission has to be seen in the perspective of a broad war by government on private enterprise and consumer choice, using taxes, restrictions, mandates, and prosecutions, ultimately resulting in an economy that is nominally private but substantially controlled by governmental chiefs. The name for that system is “fascism.”

————————————-
Reference: Sohrab Ahmari, “What Happens When a Man Takes on the Feds,” Wall Street Journal, August 31-September 1, 2013, p. A11.

Breaking Bad Policy of Drug Prohibition (spoiler alert).

Audrey Redford Current Events, Economics, Law , , , , ,

I would argue that the only positive thing that has come out of the War on Drugs is awesome TV. From The Wire to Breaking Bad, illegal drug markets have brought us entertaining and groundbreaking television, but at what cost? As Breaking Bad has sadly come to an end, I would like to look at how things might have been different for Walter White and friends in a world without the drug prohibition. While I loved the adrenaline rush I experienced watching every episode, the violence and death highlighted in the show is indicative of a major problem.

Let’s assume for a moment that prior to the creation of the show, the U.S. government ended drug prohibition. Unlike what many paternalistic politicians would like you to think, the world would not descend into utter chaos or come to a grinding halt. How would this effect the show? Well, first and foremost, there would be no DEA (high five, hell yes)… thus Walter would have never gone on the ride-along that ultimately led him to a reunion with Jesse Pinkman. It is also likely that Walt would never consider drug manufacturing as a means to solving his money problem for cancer treatment. Why do I say this? The profit margin of the caliber in the show would not likely exist in a world outside of drug prohibition. In the illegal markets, the cost and risk associated with engaging in illegal activity and possibly getting caught serve as very costly barriers to entry. There are also sizable costs associated with self-regulation in illegal markets because the court system is not an available outlet for settling disputes. This drastically limits the number of producers willing to participate in the market.

Consider the circumstances surrounding the murder of Combo (Jesse’s friend that was shot by that young kid for selling on the wrong turf). There was an implicit contract that highlighted who could sell where, and at the urging of Jesse’s quest to build his empire, Combo started selling in neighborhoods that “belonged” to a rival drug gang. In illegal markets, how do you set an example that your turf cannot be taken? You resort to violence to make an example of what will happen to anyone who tries to disregard your jurisdiction. Furthermore, the legal recourse in a murder associated with other illegal activity is complicated. Jesse could not simply go to the police and explain that Combo’s death was a result of a drug turf dispute without implicating himself in a slue of crimes. However, if the drug prohibition component was absent from this equation, the rival gang would have not have used murder in order to solve the problem. For example, do you hear of a CVS owner shooting a new-to-the-area Walgreen’s owner for opening a new location? But even in the unlikely event that this happens, because there is not any illegal activity taking place outside of the act of murder, all parties involved can provide the necessary authorities (ideally private policing companies… but that is a blog post for a later time) the information needed to bring the murderers to justice without fear of being punished. This would allow Jesse to use the court system to punish the rival drug gang members rather attempting to murder them himself (and successfully killing them thanks to Walt’s fatherly instinct and his Pontiac Aztek).

Absent that extensive (but not exhaustive) list of costs brought on by the nature of illegal markets, many potential drug producers can move into enter the market. This forces the price of the goods sold to decrease, lessening the profits available to each drug producer. Thus, the sizable profit margin that led Walt down the road of methamphetamine production would not be as high in a world with legal production (at least on the scale of production consisting of Walt and Jesse in a trailer… However, if he started his own pharmaceutical company specializing in meth, that would be a different story… one that I hope to elaborate on soon, highlighting how ending the War on Drugs is only part of the battle).

Another situation that could have been avoided was the virtual enslavement of Walt and Jesse by Gus Fring. Once again, the hold that Gus had over Walt and Jesse (knowledge and proof of their involvement in countless felony-crimes) would be a non-issue outside of a prohibition state. The same could be said about the situation when Tuco initially refused to pay Jesse for his product. Breaking Bad is full of the issues associated with the limited ability for individuals to establish, execute, and enforce contracts. With substantially better defined property rights and access to a court system to settle disputes without fear of being punished, drug producers would not need to engage in violence to settle these disputes.

So where does this leave us? Well, it would leave us with a rather boring TV show where the most exhilarating dilemma is which daycare Skyler & Walt will choose for baby Holly. No more train heists, no more wheelchair bombs, and no more car trunk machine guns. Though I do love my fellow Richmonder’s directorial and writing brilliance (Vince Gilligan, you are the man), I would be willing to trade it any day for a freer state devoid of the devastating effects inflicted on all of our lives (directly or indirectly) by the War on Drugs.

FATCA closes Americans’ Foreign Bank Accounts

Fred Foldvary Economics , , , ,

by Fred Foldvary

When the USA adopted the 16th Amendment to the Constitution a century ago, did the people understand that this would deprive Americans world-wide of foreign banking services? Americans thought that the income tax would just grab the money from the rich, but they did not understand that the income tax would tax everybody else more. All that is needed to equalize wealth without damage to the economy is to stop government subsidies, but this requires an economic sophistication that so far has eluded most people.

Inherently, an income tax yields an incentive to cheat, as the government depends on reporting. So the Internal Revenue Service has to monitor financial accounts to prevent tax evasion. Gradually, the IRS has extended its reach into accounts, first within the USA, and now into the foreign accounts held by American citizens.

No other country has imposed such costs and mandates on foreign accounts as the USA. So ironically the “land of the free” has the least economic freedom for its citizens abroad. The Foreign Account Tax Compliance Act (FATCA), enacted in 2010 requires foreign financial institutions to make reports on American accounts. Foreign financial institutions with American customers are required obtain a Global Intermediary Identification Number. FATCA requires foreign financial firms to identify their U.S. account holders, to disclose the account holders’ names, social security or other tax IDs, addresses, and the accounts’ balances, receipts, and withdrawals. For some accounts, the foreign bank is required to withhold some of the interest paid to the account, and send it straight to the IRS. This US law overrides the privacy laws of the foreign countries.

US law is thus legislating not only within US territory but throughout the whole world. If a financial firm does not comply, the IRS will tax 30 percent of its US-sourced income. The IRS is also busy laying out the legal infrastructure for enforcing this law with agreements with foreign governments for data sharing. Governments world-wide are signing on, because they too face the problem of tax evasion when they tax income that can hide.

FATCA does not just affect fat cats. Many foreign banks are now refusing to provide Americans with bank accounts and are closing the accounts of Americans, who are now also unable to obtain mortgages and insurance abroad. Americans are increasingly giving up their US citizenship in order to be able to work or retire abroad.

The US economy depends on international trade and global finance, with many Americans working abroad for US and foreign firms. Six million Americans live outside the territory of the USA. If Americans can no longer have foreign bank accounts, because the costs to the banks are too high, they will be so hampered that fewer Americans will be willing to live abroad, and this will hurt American enterprise.

Since the US government cannot directly impose laws on foreign lands, many foreign firms will sell their US affiliates and stop holding assets within the USA, thus putting themselves beyond the control of the US government. The overall cost to the US economy of FATCA may be much greater than the increase in tax revenue from reduced tax evasion. Also, those who seek to evade income taxes will find other ways. High taxes induce tax evasion, and enforcement drives evasion into other channels. How successful are US drug laws in stopping the smuggling in of drugs, and how successful have US immigration restrictions been at preventing illegal immigration?

Another consequence of greater reporting of American accounts is the increased risk of identity theft and theft of money from accounts. The greater the reporting, the greater the revelation of data that can be stolen.

It is no use seeking to repeal FATCA. The regulation of accounts, no matter how costly, follows from the income tax being, as Henry George put it, a tax on honesty. The taxation of wealth that can hide and flee requires strict and costly reporting and enforcement. The only effective remedy is to tax something that will not flee, hide, or shrink when taxed. A tax on land value cannot be evaded, and if that were the only tax, there would be no need to impose costs on finances.

Balanced Budget Amendment Slated to be Rejected by Tomorrow

Rick Weber Economics, Liberty , , , ,

So Tomorrow’s the big day. The U.S. government is slated to hit the debt ceiling, and with it will be faced with the prospect of actually having a balanced budget. I think the situation is nicely summed up in the opening sentence to an article from Cato: “America faces two very serious budget problems: Democrats, and Republicans.” Of course behind those problems are voters who vote for their congressman to steal and object to others’ doing the same.

This root problem is interesting and I’d like to take a minute to speculate about it. It looks like long term economic growth in the U.S. will slow down. The pace of government expansion can only continue so long before growth slows to a crawl and we hit some equilibrium. What happens then? I think there will be two changes in patterns of entrepreneurship.

The first change is a general decline in growth-oriented entrepreneurship. As the returns to private investment fall, young innovative entrepreneurs will focus on improving their (non-taxable) lifestyle rather than getting rich. Better to run a cool boutique shop and spend lots of time loafing around than work your ass off to pay taxes. Even more likely, students trained in navigating public schools and subsidized colleges will find themselves more at home in bureaucracy than industry. C students will get productive jobs and A students will shuffle papers.

The second change is an exodus of entrepreneurs. The U.S. isn’t the only game in town. The ambitious few who decide they want to make it big (and whose entrepreneurial spirit hasn’t been ground down by life in a culture that isn’t any longer interested in such ambition) will go elsewhere. And places like the Cayman Islands will get freer and flourish as they attract these entrepreneurs.

The U.S. as a country will gradually fade from prominence, the world will be less free overall, but some places will do well and will perhaps foster long run shifts.

Financial Armageddon; Hello Mongolia; Hello, Uganda!

Jacques Delacroix Current Events, Economics, Law, Politics , , ,

Today, this blog has had a hit from Mongolia and one from Uganda. I have no way of knowing whether any of these hits correspond to someone actually reading an item. WordPress, the sponsor of this blog, does not keep this kind of numbers. And, perhaps, it’s just as well. Visitors from outside North America are very welcome on this blog. They are also welcome to make requests. And I prize their rare comments.

This is the Nth day of federal government so-called “shutdown.” The American Left, the Obama Administration, various international pundits, have been predicting world financial Armageddon because of the shutdown and because of the budget battle that will probably follow. Instead the most common stock index, the Dow Jones Industrial Average, was up 62 points today. That’s not much but it’s not nothing. It’s up, not down. It’s not quite half a percentage point up (.42%). The French CAC40 was also up. Up is not down, no matter how you look at it.

The coming federal budget showdown (don’t confuse with “shutdown”) is about the executive branch borrowing money. It’s not borrowing money because it’s facing some extraordinary expense. It’s become routine. The belief that the federal government cannot operate within its financial means has become deeply anchored without ever being presented to the people for a vote or even for a talk. Conservatives object.

Many conservatives affirm that government borrowing should never occur except under dire and exceptional circumstances. Me, I am a wishy-washy moderate conservative. I could be convinced that federal borrowing is virtuous but I want the discussion to take place in the open. We are working on it.

There is a small technical thing that bothers me around talk of government “defaulting.” Perhaps, something can help me with this. Suppose I own government debt; suppose I own a Treasury Bond for $1,000 coming due on October first. If the federal government fails to give me my money on October 1st but, instead hands me on an IOU confirming it owes me $1,000 that it will pay soon, how worried should I be? Is my landlord not going to accept the IOU? Is the bank going to toss it into the waste basket?

And would the executive branch of government do something illegal, unconstitutional by issuing such an IOU?

Inequality Unexplained

Fred Foldvary Economics, Liberty , , , , , ,

There is a new economics documentary film that stars Robert Reich, former Secretary of Labor under President Clinton and now a professor at the Goldman School of Public Policy at the University of California at Berkeley. The film, Inequality for All,  directed by Jacob Kornbluth, won a U.S. Documentary Special Jury Award and has been shown nation-wide.

Unfortunately, Robert Reich has not explained why the US has had an increasing inequality of income. Neither in the film nor in his writings and interviews does he examine the cause. Without the elimination of the cause, there can be no remedy. As usual in documentaries of social problems, most of the film just describes and tells stories about the inequality.

Inequality for All is typical of welfare-state presentations in jumping to governmental responses that only treat the symptoms and effects. Reich advocates a higher minimum wage without any analysis what determines wages in a market economy.

Most basically, in a free market, ordinary workers are paid what economists call the “marginal product,” or what an extra worker contributes to output. If a worker adds $10 each hour to total output, then that is what he is paid, and that is what he is worth to the company. If the company pays him any less, say $8, that provides an opportunity for a similar company to offer $9 and get the $10 worth of output, so competition will drive the wage up to the worker’s contribution, his marginal product.

A minimum wage forces the firm to pay more than the worker’s marginal product. The firm will not hire a worker who costs more than he is worth. The reason that workers are not all dismissed is the law of diminishing returns. In a farm or factory, if there are only a few workers, each worker’s marginal product is high, because there is a lot of land and machines, and few workers. As workers are added, each extra worker contributes less extra output. Workers are hired up to the quantity for which the wage equals the marginal product.

The minimum wage acts like a tax on labor that forces the firm to reduce the number of workers employed to that level where the higher marginal product equals the required wage. In some cases, the firm will also respond by reducing benefits such as medical insurance such as by hiring part-time instead of full-time labor.

Many firms in competitive industries respond to the higher minimum wage as they would to a higher tax. They pass on some of the costs to the customers. The higher price reduces sales, production, employment, and income.

The minimum wage is lethal to the economy as it acts as an extra tax on employment on top of payroll taxes, unemployment taxes, workers insurance taxes, and the income tax on the profits of the firm. All these taxes reduce employment and reduce the take-home pay of the worker.

Henry George stated in his 1883 book Social Problems that “There is in nature no reason for poverty.” Poverty is caused not by any lack of natural resources but by human institutions that deprive workers of the ability to buy what they produce. The institution with the power to impose this intervention is government. The totality of restrictions, mandates, taxes, and subsidies reduces enterprise and takes away much of the product of labor. Then impoverished workers need the welfare state to provide the necessities of life.

The ideology of welfare statists makes them only think of governmental aid and reject the idea that governmental intervention is the source of the problem. They sneer at “free market fundamentalism.” They don’t understand the fact that taxes on labor redistribute wealth from workers to landowners as government taxes wages to pay for public goods that generate higher rent and land value. They don’t understand that the worker-tenant pays twice for the public goods of government, once by having half his wage taxed away, and a second time in the higher housing rental he pays because greater governmental services increase locational rents.

The effective remedy for poverty is to remove all punitive taxes and land-value subsidies. We can remove subsidies to the landed interests by having them pay back the rent generated by useful public goods such as roads, schools, and security. Without taxes on labor and enterprise, the cost of labor is lower to employers, while the worker’s take-home pay is higher. The replacement of wage taxes with land value taxes would reduce economic inequality while also increasing the productivity of the economy.

Of course the elimination of poverty also has to include better education, and that can be accomplished with vouchers, payments not to schools but to parents. A voucher is a ticket that a parent could use to send his children to the best schools. It provides an incentive for educators to produce better schools. It is not a panacea, because the home and neighborhood environment are also important, but it would shift the incentives towards better schooling.

It is not only unfortunate but astonishing that a leading professor of public policy who cares about the poor would not make the prosperity tax shift, replacing wage taxes with land value taxes, the core of his policy proposal. I suspect his response would be that while this is a good idea, it is politically unfeasible, while raising the minimum wage has political support. But the reason it is politically unfeasible today is precisely that leading reformers such as Robert Reich refuse to bring the effective remedy to public attention in the ultimately futile effort to advocate policies with the least current political resistance.

Much of the gains from economic growth and welfare get captured by higher rent and land value. Raising the minimum wage is futile because if all workers get a substantially higher minimum wage, their landlords will be able to raise their housing rentals by the amount of their greater ability to pay, and the landed interests will end up with the gains. Why do you think that housing costs have been escalating while wages stagnate?

News you can abuse from the New York Times

muricaderp Books, Economics, History, Links, Religion , , , , , , , , ,

Annoyed New York Times readers are asking why the Gray Lady recently deigned to publish an advice piece on avoiding interpersonal and legal troubles with one’s household staff. I can answer this:

1) A paper must cater to the demographic that actually buys the obscenely overpriced, and roundly obscene, items that it advertises, instead of just staring in amazement that such things exist. The Times’ gleaming new office building across from the Port Authority ain’t paying for itself, now.

You probably are not part of that demographic. When I’m cooking my own quesadillas and potato-onion stirfries in a housekeeping motel in Springfield, Oregon, I most certainly am not.

2) It is excellent click bait and a good business practice to regularly troll the poors.

My main topic tonight, however, is this week’s book review of a new Malthusian work, Countdown, arguing that the world population is overshooting its carrying capacity and nearing a crash.

I definitely find some of the alleged threats in question quite concerning, in particular the brittleness of modern crop monocultures (the Ug99 wheat stem rust is partially contained so far, but it’s no joke) and the depletion of the world’s fisheries. It’s worth noting that that’s why Somalia has so many pirates these days. Somalia has gone a generation without a coast guard. As a result, it has practically no fishery left, foreign trawlers having effectively strip-mined it in the absence of any functioning sovereign government, but as Captain Philips could tell you, it is a nation (if that) lately renowned for its fishers of men. Notice, too, that Iceland, settled by Vikings, does not have pirates or an extremist sectarian militia but does have a coast guard that opens live fire on poaching vessels within its territorial waters. These things are related.

The author, Alan Weisman, starts with a buzzkill for those who love them some Biblical living. According to the review, “Because of agricultural irrigation, the Jordan River is now a ‘fetid ditch’; pilgrims who attempt to bathe at the spot where Jesus is said to have been baptized will develop a rash and, if they swallow the water, will most likely vomit.”

Actually, Ecclesiastes was right: there’s nothing new under the sun, at least not in Holocene times. Check out this foreign army commander bitching to Elisha’s messenger in 2 Kings 5:12 about the skankiness of the Jordan, presumably not knowing its coming longue durée: “‘Are not Abana and Pharpar, the rivers of Damascus, better than all the waters of Israel? Couldn’t I wash in them and be cleansed?’ So he turned and went off in a rage.”

Dude eventually listened to the obscurantists, took his dip, and was cured. These days, the Jordan will more likely give a man leprosy, but it isn’t so much different as merely worse: thousands of years ago, rational people were scared to swim in that shit.

That said, things can get really unstable as they’re scaled up. A few tens of thousands of people watering their riverside farms from the same glorified creek may be sustainable. Several million people trying to water major cities and industrial monocultures from the same glorified creek is not sustainable at all.

The inevitable result is war. What, all sides swear that they’re holy peoples living in the Holy Land? Tough titty: they’ve still got war. In fact, they’ve got even more of it, since they’re not just desperate for resources but also inflamed by sectarian passions, the two aspects of their anger feeding one another.

As an institution, it’s good for a lot more than Edwin Starr ever wanted to contemplate. The Nazi expansion into Eastern Europe was about the glory of the Deutsche Volk, but it was also about the oil fields of Ploiesti. Hitler was a megalomaniac, but he wasn’t a total fool. Japan had an even starker motivation for its invasions of Korea (coal) and Indochina (oil, lumber, rubber): it was a heavily populated archipelago devoid of many important natural resources and, starting in 1941, under American embargo at a time when the US was the world’s top oil producer.

In a moral sense, though, Starr was right. War is a travesty. One has to be a bit dense or a lot immoral and atavistic not to recognize this. (These are great traits for government “service,” by the way.) A huge portion of the restiveness in the world can be straightforwardly explained by blatant resource shortages in times of growing population. It’s a total buzzkill for the nationalist and the End Times aficionado (similar personality types, and often the very same people, no?) but it’s true. Surely there must be an alternative to this madness.

There is. Brace yourselves.

Japan.

[T]he fertility rate is so low–1.4 children per female–that the population has been declining since 2006. This might make Japan something of a best-case situation, but an aging population means there are too many senior citizens, and not enough young people to take care of them. Already Japan has a shortage of geriatric nurses. Weisman visits Nagoya Science Park, where Japan’s oldest scientific firm has built RIBA II, a robotic white bear designed to carry elderly people around the house. It has large, widely-spaced black eyes, cute little ears and a painted smile.

“I will do my best,” says the bear, as it approaches a man who is lying on a hospital bed. “I will carry you as though you were a princess.”

RIBA II slides one paw under the patient’s knees, the other beneath his back. The robot cradles the man in its arms. It carries the man across the room, and lowers him tenderly into a wheelchair.

“I’m finished,” announces RIBA II, and it’s hard not to wonder whether the robot speaks for us all.

That bear won’t be finished with me until it can respond to my follow-up command: “Fuck you. Bring me a White Russian.”

Even if you’re familiar with Hello Kitty, you’ve probably been mercifully ignorant of Fukuppy. No more. He (she? it? ooh, goody: “indeterminate gender”) is like the Maytag Man, but actually a smiling Humpty-Dumpty with angel’s wings. Don’t blame me; I’m not the one using that imagery to market refrigeration equipment.

Why do I get the vague sense that there’s something off about modern Japan’s zeitgeist that isn’t all about raw demographics? Hello Kitty, Fukuppy, girls’ shopping getaways to Vegas, the hikikomori and the dame-ren, virtual girlfriends, a popular magazine imploring young people to start having sex again, a robotic bear that promises to carry old geezers like princesses: this isn’t just a skilled nursing shortage. If the papers aren’t reporting about how similar demographic changes play out in, say, Russia, it’s probably because the results aren’t weird enough. Babushka hoeing her cabbage patch again while her grandkids shoot smack behind a disused asbestos factory, or shut-ins who only leave the house to go on “honeymoons” with pixellated “girlfriends” while bedridden grandpa is romanced by ElderBear: which would you rather read?

There is, however, a bit of good news about Japan’s demographic profile. Rod Serling would approve.

Around the Web: The Last Psychiatrist

muricaderp Economics, Links

This blog is absolutely brilliant.

On the subliminal messages behind Sheryl Sandberg’s Lean In rubbish: 

Sheryl Sandberg is the future ex-COO of Facebook, and while that sounds like enough of a resume to speak on women in the workplace, note that her advice on how to get ahead appears in Time Magazine.  Oh, you thought that Sandberg’s book is news worthy in itself, how could you not do a story on this magnificence?  No, this is a setup, the Time Magazine demo is never going to be COO of anything, as evidenced by the fact that they read Time Magazine.  Much more importantly, they are not raising daughters who are going to be COO of anything.  So why is this here?

The first level breakdown is that this is what Time readers want, they want a warm glow and to be reassured that the reason they’re stuck living in Central Time is sexism.  This demo likes to see a smart, pretty woman succeed in a man’s world, as long as “pretty” isn’t too pretty but “wearing a great outfit” and that man’s world isn’t overly manly, like IBM or General Dynamics, yawn, but an aspirational, Aeron chair “creative” place that doesn’t involve calculus or yelling, somewhere they suspect they could have worked had it not been for sexism and biological clocks.  We all know Pinterest is for idiots.  Hence Facebook.

The author then analyzes a staged photograph in Lean In of women at a workplace meeting:

My personal vote for Lean In valedictorian is the woman at the bottom left, I don’t know her life or her medication history but she has the diagnostic sign of her cuff pulled up over her wrist in what I call “the borderline sleeve,” that girl will have endlessly whipsawing emotions and a lot of enthusiastic ideas that will ultimately result in a something borrowed/something blue.  Hope her future ex enjoys drama, he’s in for seven years of it.

You’re going to try and counter that this is a staged publicity photo, but my rum makes me fearless against your rebuttals.  During my two months of radio silence I’ve been writing a book of/on pornography, so I know it when I see it, and I see it.  Main thing to observe about this girl-girl feature: all the chicks are white.

Back up, wildman, the easy criticism to make is that there are no blacks in the picture, which is why you made it.  Everyone knows that the presence of blacks in such pics is staged, yet we still notice it, still want it.  Why?   Even though we roll our eyes if a black woman is artificially included in the pic, why are we still satisfied by her presence, or uncomfortable her absence?  Because we have no power to change the underlying reality.  “Better than nothing.”

This is a porno of a white woman’s workplace, no room for blacks in this fantasy, they don’t watch The Bachelor.  Don’t confuse aspirational with desirable, Halle Berry is ass-slappingly hot, no one wants to be her.  “If I worked at a female-friendly place like Facebook,” says anyone masturbating to this picture,  “I’d totally have time to get my nails done.”

No, the insightful criticism isn’t that they didn’t artificially include a black woman, it is that they artificially excluded Asian women– that this photo could only be made by activelydenying a reality: among women, Asian women are proportionally overrepresented in successful positions, especially tech jobs, especially Silicon Valley, and yes, Apple Maps, India is in Asia.  Putting this shot together is like staging an NBA publicity photo without any neck tattoos or handguns.   “What?”  When I was in my 3rd year of medical school and we all had to select our tax bracket, the Asian women went into surgery, ophthalmology, or the last two years of a PhD program, you know where the borderline sleeves went?  Pediatrics, which I think is technically sublimation but I’m no psychiatrist.  The logic was straightforward: they wanted  kids, and, unlike surgery, pediatrics offered future doctor-moms a bit of flexibility, while the Asian women apparently didn’t worry about working late because their kids would be at violin till 9:30.

This porno, for the Time et al demographic, cannot allow this bit of reality to be shown, because the moment you see Padmakshi or “Megan” at the table it is too real,  it undermines the entire sexism thesis and suggests that something else may be going on, it’s like watching an awesome gangbang and suddenly noticing all the empty Oxycontin bottles and that they’re speaking Serbian.  “That just makes it hotter!”  I just logged your ip address.  This doesn’t mean Asian women don’t experience sexual discrimination, it means that when an Asian woman succeeds, the other women in the office don’t get to experience sexual discrimination, so they’re left only with sexual harassment.  Read it a couple of times, it’ll make sense and you won’t like it.

On Salon’s Hipsters-on-food-stamps troll job:

While the idea of a Metafilter post-doc receiving food stamps AND telling me they’re entitled to it makes my eyes go Sauronic, it’s that rage that requires some examination.  Why rage?  Why not just roll my eyes and go back to drinking rum and soldering op amps?  What is the social importance of my rage?

Society is nothing more than individual psychology multiplied by too many to count.  If narcissism is what drives this society, then only narcissism will explain it.

So start with an interesting hypothetical: does everybody need to work anymore?  I understand work from an ethical/character perspective, this is not here my point.  Since we no longer need e.g. manufacturing jobs– cheaper elsewhere or with robots– since those labor costs have evaporated, could that surplus go towards paying people simply to stay out of trouble?  Is there a natural economic equilibrium price where, say, a U Chicago grad can do no economically productive work at all but still be paid to use Instagram?  Let me be explicit: my question is not should we do this, my question is that since this is precisely what’s happening already, is it sustainable?  What is the cost?  I don’t have to run the numbers, someone already has: it’s $150/mo for a college grads, i.e. the price of food stamps.  Other correct responses would be $700/mo for “some high school” (SSI) or $1500/mo for “previous work experience” (unemployment).  I would have accepted $2000/mo for “minorities” (jail) for partial credit.

The comment threads are a blast, too:

Rome understood the Christian Problem (leeching / dependency creation) more intuitively than any civilisation since, with the possible exception of cannibals.

“Whenever a cannibal is on the brink of starvation, the Lord, in his infinite mercy, sends him a fat missionary.” (Oscar Wilde)

Standard Oil, Like a Phoenix Rising from the Ashes (Bust the Trusts! The Right Way for Once!)

henrymoore Economics, Law , , , , , , , , , ,

What is it with me and bashing evil corporations of late (not necessarily on this blog, though I’m sure if you look through the archives…)? I hope it’s not habit-forming.

Well, could be that some of them, at least at some point in their history, became what they are with special thanks to the government. Could also be that some of them have been grandfathered in and are protected from competition from those who haven’t been grandfathered in. Might also have a little something to do with the fact that some of them have benefitted from foreign policy meddling and institutionalized theft committed by the state. But other than that, I have few complaints. Here’s a comment I left (since edited) at the end of a survey that sparked this article:

“I like surveys that have political and societal relevance. I believe in the desirability and functionality of free markets. And Exxon Mobil is a great company all things considered. However, they could not have gotten to where they are today without a little outside help. Some of this came from the consumer, to be sure. But some of it came from the state through the virtual cartel status granted to all major [US, Dutch, and British, at least] oil companies going back at least to the 1953 [CIA instigated] Iranian Coup… [This] greatly benefitted the Seven Sisters oil companies (a number of which [were Standard Oil descendants that later] merged to become Exxon Mobil) and is one of the main causes of unease in the Middle East and around the world today. They, like all oil companies, great and small, foreign and domestic, have also benefitted from oil’s status as de facto commodity backing for the US dollar. The world reserve currency known as the Federal Reserve Note is denominated in crude oil. The oil companies have a vested interest in maintaining this corrupt arrangement.”

Federal Reserve Octopus

What say you? Are some/most/all big corporations what they are today more thanks to competition or more thanks to monopoly? Here’s one for extra points: what about “small business,”? Aren’t they also protected from competition, in certain industries more than others, by regulations that keep newcomers out and by subsidies that keep competing technologies down?

For the record, anti-trust legislation actually has the effect of restraining competition, thereby securing monopoly, so when I say “bust the trusts” I don’t advocate anti-trust legislation, I simply want to let free market competition give some of these bigger guys a run for “their” money! The burden of proof is on them to show that they would really be as big as they are today were they under a system of laissez-faire capitalism. I guess you could say I’m with the left-libertarians on this one (except for the fact that I dared to use the word “capitalism”).

Standard Oil Octopus

Also, Brandon and I had our little chat on conspiracy theories. The collusion of big businesses (usually involving the state at some level) to form cartels (take note that Standard Oil, known to us today as Exxon Mobil and Chevron, was owned by John D. Rockefeller, who also had a hand in creating the Federal Reserve; I wouldn’t say everything that has happened in regards to these two was meticulously plotted, but I wouldn’t call it mere coincidence, either) happens to be one of the ones that I subscribe to. I think Adam Smith can back me up on this one. And unlike some who use the quote to support anti-trust legislation, I’ll give you more than just the first two sentences in order to show why such laws are not the best conclusion:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

Monopoly Octopus